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FEATURE STORY: INSIDE TENCENT: CHINA’S GAMING LEVIATHAN read more 1 CHARTBOOST POWER-UP REPORT FEBRUARY 2019 CONTENT Introduction 1 How China’s Censors Affect read more 6 New Game Releases read more Overview of China’s Market 2 read more China’s Ad-Supported 7 Game Market read more The Rules for Chinese 3 Publishing Deals read more How to Successfully Advertise 8 in China A Look Inside Tencent, China’s read more 4 Giant Success read more 9 Chartboost in China read more Entering China’s Mobile 5 eSports Arena read more Tencent’s Arena of Valor 2 CHARTBOOST POWER-UP REPORT FEBRUARY 2019 1 INTRODUCTION he Chinese dragon is fully ascendant, after years of fast-paced growth. Chinese mobile gamers now account for 25 percent of world- T wide in-app purchase and in-app advertising revenue, according to App Annie. There are more Chinese smartphone users than there are in the European Union: about 775 million, by researcher New- zoo’s latest estimates. But China isn’t an easy market — even for local devel- opers. In March 2018, the government began a 9 month freeze on new mobile games approvals. In August 2018, the government further punished its largest game com- pany, Tencent, by blocking sales of Monster Hunter: World only eight days after the game’s release. The Mid- dle Kingdom is marked by fierce competition, and even fiercer regulators. 3 CHARTBOOST POWER-UP REPORT FEBRUARY 2019 Despite the challenges, nobody wants to be left out. Advertising in China is similar, in some respects, to can Western developers, publishers and adver- Luckily, as with so many things in China, regulations the game market: a partner or agency is almost a tisers enter this enormous market? This report can’t completely halt business. Just as there are necessity. The government also regulates ads. In includes exclusive interviews with analysts at ways around the Great Firewall, there are still ways mobile advertising, the market is still in its early stag- Niko Partners, Newzoo and PwC, as well as Chi- to thrive in the Chinese mobile market. es: most inventory is confined to a few apps, and na market consultants, publishers and advertis- within those apps, engagement data can be lacking. ers, on how to tame — or at least survive — the For foreign developers seeking a way in, partners Brands may feel lost about who to target, or how to Chinese dragon. abound. The largest publishers, Tencent and Ne- control advertising budgets that sometimes seem tease, are always on the hunt for games that can to disappear into unfamiliar networks and analytics excite audiences of millions. Smaller niches such as tools. But just as in publishing an app or game, get- strategy or anime-based games have their own sets ting advertising right can result in huge rewards. of publishers. Even mobile eSports, which remain a niche market elsewhere, are full blown in China. Chartboost’s first China report, 2016’s China Rising, There are more than 10,000 eSports teams for a sin- tracked the rapid growth of China. In this edition, we gle mobile hit, Arena of Valor. look beyond growth to strategy: where, and how, 4 CHARTBOOST POWER-UP REPORT FEBRUARY 2019 2 OVERVIEW OF CHINA’S MARKET obile app developers already know that Chi- na is the world’s most fragmented market. Multiple app stores compete for users. Pub- M lishers abound, helped along by the fact for- eign companies are required to work with a local partner. The country’s landscape has looked like the Wild West of mobile gaming for years. Apple, which has a single store, claims only a quarter of Chinese smartphone users. Meanwhile, Android’s nearly 600 million users are split into multiple stores — over 400, according to an oft-repeated statistic. But the huge diversity of distribution is only the tip of the iceberg: popular to talk about, but not as relevant as it seems. “At a high level, fragmentation has historically been a positioning point for Chinese companies. They hype up fragmentation because it justifies the need to work with them,” says Josh Burns, the founder of con- sulting firm DigitalDevConnect. In this section, we’ll take a look at how the Chinese mar- ket has consolidated as it matured— and why it’s more necessary than ever to find a local partner. 5 CHARTBOOST POWER-UP REPORT FEBRUARY 2019 ANDROID: FEWER MAJOR PROBLEMS Many small Android stores continue to cling to life — but this isn’t a fact to get hung up on. Only 10 important stores remain, and even among these, a publisher may choose just a handful. In general, these stores fit in two categories: large publishers, and hardware manufacturers. The two largest stores, Tencent’s MyApp and Qi- with women, like dating sims, might find a wel- hoo’s 360Mobile Assistant, take a third of the mar- come reception in the Huawei store. ket by themselves. Both companies are experts in publishing, with their own apps ranging from However, Western companies are unlikely to get games and social to security, and offer access to placement on any store without help. “In these a majority of the market. Of the remaining stores, stores it’s based on track record and relation- most are owned by hardware manufacturers, who ships, not because an app is innovative and inter- pre-install their own stores on their phones. esting,” says Burns. ON THE TOP 5 ANDROID STORES, AN APP By releasing on just the top 5 Android stores, an DEVELOPER CAN REACH OVER HALF OF app developer can reach over half of the address- THE ADDRESSABLE MARKET. able market. As a result, the most pressing issue for foreign developers is ensuring their app re- In parallel with the reduced number of important ceives sufficient promotion on a handful of stores platforms, there are also fewer potential partners to — or even just a single store. evaluate — although enough remain to serve de- velopers of all types. “A lot of the smaller publishers Each store tends to have its own strategy and are merging with larger ones or being closed down. policy. For instance, since Huawei is looking to There is still a healthy middle ground of publishers,” increase their female user base, games popular says Daniel Ahmad of Niko Partners. 6 CHARTBOOST POWER-UP REPORT FEBRUARY 2019 iOS, THE “LOOPHOLE” MARKET While the platforms mentioned above represent lot of effort you can put into finding a partner and the majority of the Chinese market, developers even if they execute they may not be that profit- still have access to an alternative that bypasses able,” says Burns. But be warned: if you later de- the need for government approvals and partners. cide to expand to Android, the initial iOS release This “loophole” is iOS, where releasing games is may become a point of contention. “Local pub- the same as in any other country. lishers don’t like publishing games where they only retain rights to the Android version, because Only a quarter of Chinese users are on iOS. How- it becomes more complicated revenue-split and ever, these users are on the lookout for new marketing-wise,” said Jeff Lyndon Ko, founder of games. “There’s still huge demand from gamers. iDreamSky, during a talk with Chartboost. Not just from new games being released, but leg- acy titles. Four to five games coming out recently For now, the iOS “loophole” remains. But the spe- in the iOS store have jumped right into the top of cial status may not last forever. Ahmad suggests the charts,” says Daniel Ahmad, an analyst at Niko that the government may be in the process of for- Partners. mulating new rules more tailored to the mobile market. If that’s true, including iOS in the regula- The easier standard for success on iOS leads tory regime may be part of the plan — finally, if some developers to stop there. “These days I perhaps regrettably, creating a single landscape push people to explore focusing on iOS and what for foreign developers to enter. they can do on their own. The reality is there’s a 7 CHARTBOOST POWER-UP REPORT FEBRUARY 2019 3 THE RULES FOR CHINESE PUBLISHING DEALS inding a partner or publisher in Chi- Tencent, the largest publisher, has powerful tools na has always been a good idea. Be- for promotion. WeChat, its social app, is used by fore Android games required gov- 80 percent of smartphone owners in the country F ernment approval, before the market — and Tencent isn’t shy about promoting prod- was intensely competitive, China still ucts, including games, to those users. But there required local relationships and knowledge for are many other choices: game developers, spe- games to thrive. cialist publishers, platform holders, and even seemingly unrelated companies in industries like Now, having a publisher is nearly mandatory. Ap- real estate or mining are all on the hunt for great proval covers a long list of potential details, down content. And as competition rises within China, to the wording of buttons and icons in the game. many of these companies are also looking for And once your game is approved, it won’t go any- games to publish outside of the country. where without business deals for promotion. 8 CHARTBOOST POWER-UP REPORT FEBRUARY 2019 and decide to go with that guy. Commonly, EVERYTHING MUST BE IN SIMPLIFIED CHI- they will not get the 50 million downloads, NESE. IN SOME GAMES THEY’LL HAVE XP or they will get 50 million bad quality down- FOR EXPERIENCE POINTS, BUT CHINESE loads.

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